PLX – Riding on petroleum consumption recovery – Update

• PLX posed 4Q21 net profit (NP) of VND595bn (-37.5% yoy) due to lower domestic sales volume. FY21 NP surged 186.3% yoy to VND2,830bn.
• We expect PLX’s NP to grow 47.8%/13.6% yoy in FY22-23F, following the domestic petroleum consumption bounce back.
• Reiterate ADD with a higher target price (TP) of VND70,100.

Recovery momentum was pulled back in 2H21 due to Covid-19 outbreak
PLX’s 4Q21 net revenue surged 57.9% yoy to VND49,372bn thanks to higher average selling prices (+c.70% yoy), which offset to a 10% yoy decrease in domestic petroleum sales volume. However, as PLX earned the fixed profit on each liter of petroleum sold, lower sales volume combined to the inventories provision expense of VND199bn led to the 18.1% yoy decrease in 4Q21 gross profit. Besides, 4Q21 affiliates income declined 17.8% yoy due to the lower contribution of Castrol BP Petco, which was also hit by the Delta outbreak in 2H21. As a result, PLX’s 4Q21 NP dropped 37.5% yoy to VND595bn.

For 2021, NP surged 186.3% yoy to VND2,830bn mainly thanks to strong 1H21 while 2H21 results were hit by Delta outbreak. FY21 NP just fulfilled 82.8% of our forecast as we projected lower SG&A expenses but higher affiliate income.

Short-term domestic supply shortage is likely to bring the mixed effects
Recently Nghi Son refinery decreased its operation capacity due to financial problems, causing the short-term domestic supply shortage. Accordingly, we see the mixed impact on PLX’s activities. On the one hand, PLX is likely increase its sales volume when small players struggle to look for alternative sources. On the other hand, this issue could negatively impact on PLX’s GPM as PLX must raise imported sources with high transportation costs. However, we believe Nghi Son will soon increase its capacity as it has received financial support from PVN.

Positive FY22-23F prospect on petroleum sales volume recovery
After hit hard by Delta outbreak in 2H21, we expect PLX’s domestic petroleum sales volume to recover in FY22-23F with a CAGR of 7% when Vietnam applies new strategy to “live safely with Covid-19 pandemic” and re-opens the economy. Moreover, we forecast FY22-23F JetA1 sales volume to surged 70%/25% yoy following the aviation activities rebound after the pandemic. Overall, we expect PLX’s NP to grow 47.8%/13.6% yoy in FY22-23F, respectively.

Reiterate ADD with a higher TP of VND70,100
We raise our TP by 8.0% on the back of: (1) rolling forward our DCF model to 2022, and (2) lower FY22F EPS forecast by 4.2% but increase FY23-24F EPS forecasts by 3.1%/9.6% mainly due to higher Brent oil price assumptions. Re-rating catalysts include higher-than-expected sales volume and the divestment from PG Bank deal. Downside risk comes from any new Covid-19 waves.

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